Obama targets oil profits

WASHINGTON - President Barack Obama, predicting that oil and gas companies will report "outsized profits" this quarter, urged Congress on Tuesday to eliminate tax breaks that he said provide the oil and gas industry with more than $4 billion in annual subsidies.

Obama, in a letter to House Speaker John Boehner, R-Ohio, House Minority Leader Nancy Pelosi, D-Calif., Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., asked the leaders to take immediate action.

The president said high oil and gasoline prices "are weighing on the minds and pocketbooks of every American family."

If energy costs remain high, he said, they could slow the economic recovery.

Obama said U.S. tax laws are outdated and that the high returns in the oil and gas industry "provide more than enough profit motive to invest in domestic exploration and production without special tax breaks."
Speaker agrees to look

Boehner, in an interview Monday with ABC, said "big oil companies don't need the oil depletion allowance" but that smaller, independent companies do. He also said proposals to end other oil and gas subsidies "are certainly something we should take a look at" at a time when the federal government needs more revenue.

The depletion allowance — one of the most controversial of government preferences for the industry - dates back to 1926. Much like depreciation in other businesses, it enables producers to recover the cost of capital investment.

In his letter, Obama said he was heartened by Boehner's comments.

Major oil companies are announcing their first quarter earnings this week, including BP and ConocoPhillips today.

Obama has previously targeted oil and gas industry tax breaks. His latest blast was aimed at capitalizing on consumer frustration with gas prices as well as calling further attention to Boehner's comments. The speaker's remarks were a surprise coming from a leader of the GOP, a traditional defender of the oil and gas industry.

The trade group for independent producers took a dim view of Obama's latest pitch.

Barry Russell, president and CEO of the Independent Petroleum Association of America, said the president's tax proposals "do not target Big Oil, but instead go after 18,000 American independent oil and natural gas producers, who on average employ only 12 workers."
Industry protests

Russell also said independent producers drill 95 percent of the nation's natural gas and oil wells and account for 67 percent of U.S. natural gas and oil production.

If taxes on these producers go up, they will reduce capital investments, he said.

John Felmy, the American Petroleum Association's chief economist, suggested in a statement that Obama's proposal was borne of desperation and would do nothing to reduce gasoline prices.

Instead, Felmy saidd, it would "reduce investment in new oil and natural gas projects, cost new jobs and decrease oil and natural gas production.“